The Securities and Exchange Commission (SEC) has announced that Robinhood Securities LLC and Robinhood Financial LLC (collectively, Robinhood) will pay $45 million in combined civil penalties to settle various charges related to their brokerage operations.

Robinhood to Pay $45 Million in SEC Penalties Over Multiple Violations

According to the SEC’s order, the violations included the following:

1. Suspicious Activity Reporting: From January 2020 to March 2022, Robinhood failed to investigate suspicious transactions in a timely manner, leading to systemic failures in filing suspicious activity reports.
2. Identity Theft Protection: Between April 2019 and July 2022, Robinhood lacked adequate policies and procedures to protect customers from identity theft risks.
3. Unauthorized Access to Systems: In 2021, Robinhood failed to address cybersecurity risks, leading to unauthorized access in November 2021, where a third party downloaded sensitive customer data.
4. Off-Channel Communications: Robinhood failed to maintain electronic communications in compliance with federal securities laws, violating recordkeeping provisions.
5. Retention of Brokerage Data: Robinhood did not maintain operational databases in a way that protected legally required records from modification or deletion.
6. Failure to Maintain Customer Communications: Between 2020 and 2021, Robinhood failed to preserve communications with brokerage customers as required by law.

Additionally, Robinhood Securities faced further violations:

• Electronic Blue Sheets: For over five years, Robinhood Securities failed to submit accurate securities trading information to the SEC.
• Fractional Share Trading and Stock Lending: Robinhood Securities violated Regulation SHO by not adhering to rules related to short selling from May 2019 to December 2023.

So, Robinhood has agreed to pay a $33.5 million penalty for Robinhood Securities and $11.5 million for Robinhood Financial. Both firms have admitted to the SEC’s findings and will implement audits and corrective measures to address compliance issues.

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